Abstract

Melding the power of the state with the power of capitalism, state-owned and state-controlled enterprises continue to control the commanding heights of the Chinese economy even though market-oriented reforms have led to a rapid expansion of the private sector in China. This article reflects on how China's practice of state capitalism challenges the world trading system and how WTO law, as interpreted by WTO Panels and the WTO Appellate Body (AB), addresses these challenges. The article concludes that the WTO Agreement on Subsides and Countervailing Measures (SCM Agreement) has been interpreted in such a manner that many key features of China's state capitalism could easily be challenged by its trading partners in a WTO-consistent manner. This finding has profound implications for China's domestic economic reforms, especially China's ongoing reforms of its state-owned enterprises and commercial banks.